The HKS endowment pays for your education – just don’t ask how


By Alexi White, Opinions Editor, MPP ‘13

In fiscal year 2011, HKS collected $37.3 million in revenue from investment income, the annual return on our $1 billion endowment. About half went to core operations such as faculty chairs, financial aid, events, maintenance, staff, etc.; the other half went to funding the IOP and research centers.

Although this represents one quarter of the school’s total revenue, exactly where these proceeds came from remains a mystery even to HKS administrators. We just cash the check and try not to ask too many questions.

Given that Harvard has in the past invested in morally questionable activities, this lack of transparency should be concerning to our community – administration included. As an institution that purports to stand up for the public interest, we have a duty to ask whether we are profiting from activities that subvert that same interest. Regardless of the answer to that question, that we are prevented from even engaging in this conversation is deeply troubling.

The HKS endowment is a small part of the much larger Harvard endowment that is managed by the imaginatively named Harvard Management Company (HMC), a separate corporation whose “singular mission is to produce long-term investment results to support the educational and research goals of the University.” As of June 30, 2011, the total endowment was valued at $32 billion, making it about equal to the GDP of Yemen.

I contacted HMC by email to request specific information on what ventures it is invested in. Their reply: “Our policy is not to discuss individual investments.” When I pressed further, asking to see this policy, I was told that it is not written down. Two further requests for the rationale behind this policy went unanswered.

I also asked to see their policies on responsible investment. I was told that two bodies have been established to consider these issues: the Advisory Committee on Shareholder Responsibility and the Corporation Committee on Shareholder Responsibility. The former has student, faculty and alumni representatives and provides advice; the latter does not have these representatives and makes the decisions. I asked to see the policies that contained each committee’s roles and responsibilities. Their reply: “I’m afraid that is all I have for you.” Refusing to share their policies on social responsibility doesn’t exactly engender trust that HMC is doing the right thing in our name.

Outside HMC, little is known about what activities this money is funding and what profits are made as a result, but this has not stopped some from unearthing examples of controversial investments. The Student Labor Action Movement, a Harvard student group, has raised concerns that HMC has invested in HEI Hotels, a company that buys hotels, turns them around, and sells them for a profit. It has been accused of violating labor laws and engaging in anti-union intimidation. In another case, the Oakland Institute revealed HMC has invested in Emergent Asset Management, a hedge fund specializing in agricultural investments. It has been accused of signing agreements with corrupt African leaders to buy large swaths of land in Africa, displacing the local farmers.

As Katie Grace, the coordinator of the Initiative for Responsible Investment at the Hauser Center pointed out, this is likely the tip of the iceberg when compared to oil, mining, and other potentially controversial investments that the average university endowment fund may hold. She believes HMC should be held to a higher standard.

“[A lack of] transparency is endemic across most private universities,” she said. “They’re charitable, tax-exempt organizations that benefit from the state, but they aren’t required to disclose their investments to society.”

According to Grace, HMC would counter that secrecy is necessary to maintain its competitive edge.

“Their duty is to the endowment, not to anyone else,” she added.

Since HMC apparently doesn’t discuss their rationale, we’ll have to settle for guessing at it. As an aside, the Initiative for Responsible Investment is funded entirely through grants and sponsored research.

Whether or not HMC’s investments can be adequately defended is not what I am arguing here. I suggest only that sufficient concern exists as to cast doubt on whether the HKS endowment is serving the public interest, as we aspire to do. This doubt compels us, as members of the HKS community, to demand a higher level of transparency.

Ignoring such an abstract issue is easy, especially when acknowledging it will likely mean a certain level of sacrifice. Nevertheless, we – administration, faculty, staff and students – should stand together for the values we espouse, and ask HMC to tell us what we need to know.

A request for a comment from Dean Ellwood was not returned by press time.

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